Posted on 12/21/2013 8:55:31 PM PST by narses
I’d like to see a respected government create a digital currency.
Switzerland perhaps?
I must admit that it was a disappointment when they bowed down to US pressure to rat out some depositors :-(
When bitcoins go bad: 4 stories of fraud, hacking, and digital currencies.
With Bitcoin interest (and prices) spiking, you might be considering investing in your own little cache of digital currency. But before you set up a Bitcoin wallet, you should think long and hard about who will watch over your digital wealth. In its relatively short lifespan, Bitcoin wallets and processors have been a target for hackers — and old-fashioned fraudsters. In fact, within the last week, one of the most prominent European exchanges reported it had lost over $1 million worth of bitcoins to hackers.
An academic study published earlier this year by Tyler Moore at Southern Methodist University and Nicolas Cristin at Carnegie Mellon about the risks associated with Bitcoin exchanges reported that 18 of 40 services they studied over three years closed “with customer account balances often wiped out.” In that study, less popular services were more likely to just disappear than popular exchanges — but popular exchanges were more likely to suffer security breaches, which have also been blamed for disappearing bitcoins.
Their research supports the anecdotal evidence about the security of various Bitcoin services — or lack thereof. The forum Bitcoin Talk has a relatively comprehensive list of incidents, but here are a few of the most notable (and costly) stories about investing in Bitcoins going bad.
European payment processor and wallet service loses over $1 million worth of bitcoins
BIPS, a Denmark-based Bitcoin payment processor with a free online wallet service reportedly lost 1,295 bitcoins over the course of a few days earlier this month — just over $1 million worth at current exchange rates. Coindesk reports that the service was the subject of a series of DDoS attacks that appeared to be connected to the heist. The company’s CEO said most of the missing funds were from the company’s own holdings, but a statement addressing the incident noted that some users also took a hit
BIPS has been a target of a coordinated attack and subsequent security breached. Several consumer wallets have been compromised and BIPS will be contacting the affected users.
Inputs.io loses $1.2 million worth of bitcoins to apparent hack
Another online wallet service, Inputs.io, was compromised in late October. Hackers reportedly made off with 4,100 bitcoins, then worth $1.2 million, during two separate attacks — despite an extensive list of security measures. TradeFortress, an individual associated with the service, said that it was a social engineering attack that allowed the adversary to reset the passwords for the system’s cloud-hosting provider. Users are eligible for a partial refund of their losses out of its remaining funds on a sliding scale that decreases based on how much was stored, likely cold comfort for anyone storing significant sums with the service.
Chinese Bitcoin trading platform disappears — with $4.1 million worth of bitcoins
A prominent Chinese Bitcoin exchange that claimed to be based in Hong Kong, GBL, disappeared in late October — along with $4.1 million worth of bitcoins. The platform had only launched in May, and there were a few other red flags, including that it did not obtain a license to operate financial services, according to the Want China Times.
Alleged Bitcoin Ponzi scheme faces SEC suit
In 2011, an individual started advertising returns on Bitcoin investments that sounded too good to be true — 1 percent interest daily via an investment scheme eventually called Bitcoin Savings and Trust. The whole thing looked like a bit of a pyramid scheme and shut down without returning some 500,000 bitcoins (then worth more than $5.6 million) to investors in 2012. And an SEC suit alleges that it was too good to be true, saying the proprietor of the service “falsely promised investors up to 7% interest weekly,” but the actual offering “was a sham and a Ponzi scheme” where he used new investments to pay off outstanding returns and pocketed the rest.
You said a mouthful there FRiend.
I’ll go one further. It is no more of a scam than any other currency on earth. And no less.
Ultimately, all currency is so-called “fiat” currency. All of it. Even if said “money” is in gold pieces of eight. All currency only works as a medium of exchange because the seller agrees to take some of it in exchange for their product or service. The seller agrees to do this only because they believe there will be others who will accept that currency in exchange for something they want.
And ultimately, all death is so-called “heart failure”. But that definition cheapens any analysis beyond utility.
A fair point.
If bitcoins can be made secure enough, it’s the way of the future for sure.
I had to wonder the other day when there was a big drop, if it’s a sign of imminent collapse or a great buying opportuity.
Ping
Bitcoin will likely be sabotaged to instill FUD. It’s an interesting concept nonetheless.
An imaginary money made up by a hacker. What could go wrong?
:)
Uh... No it's not.
sounds like the Federal Reserve
I wish the author had pointed out the differences between US currency and Bitcoin.
Uh... No it's not.
Simple:
The US Dollar is backed by a (significant) sovereign taxing power and is created by, and backed by the borrowing of money in a fractional reserve system.
Bitcoin is a phantasm created by an anonymous hacker.
Not even close.
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